Estate Tax Limbo

Most fellow CPAs who practice in the tax arena, and more specifically the estate tax arena, have surely scratched our heads for some time now.  Prior to 2010 we were aware that the estate tax for 2010 would be eliminated and replaced by a different basis carryover scheme.  Had we been gamblers, most of us would have bet and fully expected Congress to have passed legislation prior to 2010 to avoid the zero tax year.  The worst part of this law for the taxpayer is that it will sunset on December 31, 2010 and the prior estate tax law will come back with a vengeance.  So once more, if we were gamblers, we could place a healthy bet that Congress will pass estate tax legislation by December 31, 2010.

I saw a recent “Checkpoint” reference to this issue which pointed out that the estate tax on a $4 million taxable estate would be as follows:

                                                2009                                       $  225,000

                                                2010                                                  Zero

                                                2011                                       $1,495,000

Simply looking at these “numbers” should give us a perspective on how much attention should be given to this subject. A past Wall Street Journal article suggested that the estate of George Steinbrenner could save up to $600 million in estate taxes, simply because Mr. Steinbrenner passed away in 2010.  While this is a sad event for the family in losing a loved one, the heirs of the estate have reaped a healthy financial savings. 

I would also think that one should be very, very careful if they have been assigned authority through health care powers of attorney for someone with a taxable estate.  It may sound rather evil, but one must wonder how many life saving decisions may be made in the last few weeks of 2010.  Forgive me if I sound morbid, but this matter could drop into the laps of some very unsuspecting individuals.  Far be it for me to suggest that this also be a matter of estate planning, it is difficult enough to face those times in our lives when we must make life decisions for loved ones.

Hopefully in the near future our Congress will pass legislation that brings back some stability to the estate tax system.

Blogger: Charles ‘Eddie’ Brown, CPA

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The South Carolina Association of CPAs is a professional organization that provides support to all CPAs – whether in public practice, industry, government or education - with lifelong learning opportunities necessary for their success, the promotion of high ethical standards and legislative advocacy for both the public good and for the profession.
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